gsn/fun update february 16, 2009. page 1 executive summary a sale of our 35% interest in gsn at a...

GSN/FUN Update

February 16, 2009

Executive Summary

• A sale of our 35% interest in GSN at a $780MM valuation would yield a gain of approximately $194MM

• The combined valuation for GSN/FUN was at the high-end of the range in April 2009. After recent market increases, $780MM is more in-line with public comparables but still implies a healthy control premium

• After recent Liberty restructurings, DirecTV now holds 65% of GSN and has a right of first refusal on a sale

– Unclear if DirecTV’s new management intends to acquire network assets

– No immediate forcing function, buy/sell not in place until December 2011; “put” not in place unless DirecTV is sold to a third party

Summary of Prior Transaction

$600MM $180MMAssumed Transaction Price

% Sold / Bought 15% 35%

Cash to (from) SPE $90MM ($63MM)

Resulting SPE Stake 35% 35%

GSN FUN

Valuation in February 2009 Transaction

Basis

Remaining GSN Basis

Total GSN/FUN Carrying Value

FUN Purchase

$13.8MM

$63MM

$76.8MM

1/31/2010 3/31/20113/31/2009

--

--

$69.9MM

--

--

$78.6MM (1)

$780MM

N/A

$27MM

35%

Combined

$780MMAssumed Transaction Price

SPE Stake 35%

Value of SPE Share $273MM

Basis (1) $78.6MM

3/31/2011

Gain if sold for $780MM

Gain $194.4MM

(1) Includes dividends of $0.5M from Feb-Mar 2010 and $17.5M in FY11 and equity income of $3.1M from Feb-Mar 2010 and $23.6M in FY11.

Combined GSN/FUN Earnings Are Roughly In-Line With Expectations

• Since the last transaction, underperformance by FUN has been offset by over performance by GSN

(1) Provided by GSN Management September 2008; earnings are pro forma as if DirecTV was paying $0.075/sub in all years, CY08 excludes $5.6MM Comcast Reserve Reversal and CY09 excludes a one-time DTV catch-up payment of $13.8MM.

(2) CY2009 per Management budget; CY2010-CY2012 per SPE haircut to forecast

GSN DEAL DOCUMENTS APRIL 2009

EBITDA

CY08 CY09 CY10 CY11 CY12

GSN (1) $49,283 $36,616 $44,267 $52,748 $61,971

FUN (2) $6,454 $13,225 $21,262 $28,695 $35,189Total $55,737 $49,841 $65,529 $81,443 $97,160

2009 MRP

EBITDA

CY08 CY09 CY10 CY11 CY12

GSN $49,283 $42,773 $56,395 $63,908 $71,535FUN $6,454 $7,635 $10,026 $13,612 $16,253Total $55,737 $50,408 $66,421 $77,520 $87,788

Valuation Considerations at Time of Last Transaction (April 2009)

DCF at 11% after-tax discount rate

Deal was below DCF by:

DCF

$645MM

(7%)

Public Comparables

7.3X

16.4X

125%

EBITDA(1) Multiple for Comps(2):

Deal was above Comps by:

EBITDA(1) Multiple for GSN @ $600MM:

(1) EBITDA multiples are after programming amortization.(2) Comparables included Scripps and Discovery.(3) Median of selected media M&A transactions from 2006 through January 2009 adjusted downward to account for declines in public markets through April

2009.(4) Based on FUN 2009 EBITDA forecast at time of deal, which was $13.2MM.(5) Revenue multiples on comparable transactions were decreased by 35% to account for declines in public markets through April 2009.

• Each business was valued independently

• DCF values and comparable transaction multiples were generally in-line with actual transaction values

• However, transaction values were at significant premiums to public markets, which were depressed at the time

GSN Valued at $600MM FUN Valued at $180MM

M&A Transactions

15.0X

12.2X

(19%)

Trailing EBIT Multiple on Comps(3):

Deal was below Comps by:

Trailing EBIT Multiple for GSN @ $600MM:

Forward Trailing

6.8X

12.2X

79%

DCF at 15% after-tax discount rate

Deal was below DCF by:

DCF

$198MM

(9%)

Public Comparables

8.4X

13.6X

62%

Forward EBITDA Multiple for Comps:


Forward EBITDA(4) Multiple for FUN @ $180MM:

M&A Transactions

3.1X

3.2X

4%

Trailing Revenue Multiple on Comps(5):


Trailing Revenue Multiple for FUN @ $180MM:

Valuation Considerations Today

8.1X

11.7X

45%

EV/EBITDA

Multiple for Comps(1)

Implied Premium

GSN/FUN Multiple @ $780MM Value (2)

(1) For Scripps and Discovery, multiples represent 12 months ending CY2009 and CY2010. EBITDA is after programming amortization.(2) Multiple based on CY2009 EBITDA of $50.4MM and CY2010 EBITDA of $66.4MM.

13.9X

15.5X

12%

EV/EBITDA

Travel Channel / Scripps

Implied Premium

GSN/FUN Multiple @ $780MM Value

Public Comps Comparable Transactions

• Going forward, GSN/FUN is likely to be valued as a single business and compared to comparable cable networks

• A combined $780MM valuation remains in-line with values implied by recent M&A transactions and is now more in-line with public comparables

– 45% - 49% premium to public multiples is a healthy but feasible control premium

Forward Trailing

10.4X

15.5X

49%

Trailing

7

In November 2009, Liberty Split-Off a Subset of Assets Including GSN

Liberty Capital Liberty Interactive

• Backcountry.com (81%)

• Bodybuilding.com (83%)

• Borba (25%)

• BUYSEASONS (100%)

• Expedia (24%)

• GSI Commerce (19.7%)

• HSN (30%)

• IAC / InteractiveCorp (30%)

• Interval Leisure Group (30%)

• Provide Commerce (100%)

• QVC (100%)

• Ticketmaster (30%)

• Tree.com (Lending Tree) (30%)

• Atlanta National Baseball Club (100%)

• Current Group (8%)• Embarq Corporation (3%)• Hallmark Entertainment Invest. (11%)• Jingle Networks (9%)• Kroenke Arena Company (6.5%)• Leisure Arts (100%)• LodgeNet Entertainment (9%)• MacNeil / Lehrer Productions (67%)• Motorola (3%)• Overture Films (100%)• Priceline.com (1%)• Sprint Nextel Corporation (3%)• Starz Media (100%)• Time Warner (3%)• TruePosition (100%)• Viacom (1%)• WFRV / WJMN Television (100%)

“LINTA” , “LINTB”“LCAPA” , “LCAPB”

Liberty Entertainment

• DirecTV (52%)

• FUN Technologies (100%)

• GSN (50%)

• Liberty Sports Holdings (100%)

• Starz Entertainment (100%)

• Wildblue Communications (37%)

• PicksPal, Inc (73%)

“LMDIA” , “LMDIB”

Liberty Entertainment Inc.

• DirecTV Group (54%)


• GSN (65%)


“LEI”

Liberty Media Corp Tracking Stocks

Assets Transferred to Liberty Entertainment Inc. (Split-off Entity)

8

LEI Was Subsequently Merged into DirecTV, Which Now Owns 65% of GSN / FUN



• GSN (50%)


“LEI” Stockholders


DirecTV Group Stockholders (excluding LEI)

OLDOLD

NEWNEW

DIRECTV “Holding” (Ticker: DTV)



• GSN (50%)


8

Key Management

Name Title

Michael White

President & CEO

Eric Shanks

GSN Board Member Executive Vice President of Entertainment and Head of DIRECTV Entertainment of DirecTV Group, Inc.

Derek Chang

GSN Board Member Executive Vice President of Content Strategy and Development of DirecTV Group Inc.

Ownership

Equity Voting

Institutional / Mutual Fund Holders

54.0% 42.0%

John Malone 0.2% 23.8%

Other Holders (Incl. Insiders & 5% Holders)

45.8% 34.2%

Total 100.0% 100.0%

Former LEI 55.0% 66.0%

Former DirecTV 45.0% 34.0%

Total 100.0% 100.0%

gsn/fun update february 16, 2009. page 1 executive summary a sale of our 35% interest in gsn at a...

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